How to understand Risk in Mutual Funds

All Mutual Funds have some risk associated with them. It can range from Low to High and is depicted by …

All Mutual Funds have some risk associated with them. It can range from Low to High and is depicted by a Riskometer as seen above:


What does risk in Mutual Funds actually mean?

The risk associated with a Mutual Fund is the risk on the principal investment amount. For e.g., if you bought a Mutual Fund for Rs 1000 (which is your principal amount) and sold it after 1 year for Rs 1100, you get back your principal amount of Rs 1000 plus a profit of Rs 100.

So when you think about risk, you are basically thinking: 

“What are the chances of my principal amount losing value i.e. Rs 1000 becoming Rs 990 or say Rs 900? 

And then you might also ask:  “Why should I even consider taking high risk?”
It’s simple because “Higher risk means potentially higher returns”
Higher returns are important to beat inflation, meet your future goals and live comfortably.


How do I select the right Mutual Fund in MobiKwik based on Risk?

Use the table below to understand your investment approach and the right risk type and Mutual Fund for you:

Your investment Approach Meaning Suitable Mutual Fund Risk Level
Ideal Mutual Funds
Cautious You want maximum safety of your principal and are OK with lower returns that are only better than Bank Savings a/c or FDs Low
Kwik Save, Liquid Funds
Steady You are OK with small amount of risk for 2-3% more returns than alternatives like Fixed Deposit Moderately Low
Short Duration Funds,
Ultra Short Duration Funds
Balanced You are OK with moderate levels of risk for moderate to high returns by investing in stocks Moderate
Hybrid Funds,Large Cap Funds, Index Funds
Growth You want potentially higher returns by taking on higher risks by investing in stocks Moderately High
Multicap Funds, Mid Cap Funds
Aggressive You want the highest possible returns even if there is a higher risk of losing the principal amount High
Small-Cap Funds

Remember that taking
Moderate to High risk is suitable only for investors who can stay invested for 3 years or longer. Stock markets generally experience higher-ups and downs during shorter time intervals but offer positive returns over longer periods (3 Years or more).  If you want to invest for shorter durations, take only low to moderately low risk.

Where can I see the Risk type in MobiKiwk Mutual Funds?

The risk type associated with a Mutual Fund is prominently displayed with every Mutual Fund in the MobiKwik App like shown below:


Additionally, you can even search for Mutual Funds on the basis of Risk Type using the Advanced Filter option as shown below:

Look for our recommendations within each Risk Type to select the Best Mutual Fund for you.


Disclaimer: Mutual Fund investments are subject to market risks. Read all scheme related documents carefully